Sales Case Study

Over a hot cuppa of coffee and the morning newspaper at office, Abhinandan was gloating over a
business analysts report of Marico Ltd. As the Regional Sales Head at Marico Ltd, an $800 million FMCG
MNC based out of India, he was reading about Marico cruising through a YOY sales growth of 28% in
2014.
Having joined the organization as a young Management Trainee in 2006, it was a matter of pride for him
to see Marico grow from strength to strength and quadruple its turnover in less than 8 years.
Marico, ranked 53 in the Forbes list of the top 100 innovative companies globally, with a slew of awards
for Sales Excellence, Employee Satisfaction & Supply Chain Efficiencies had become a model company in
the FMCG domain, and Abhinandan was proud of each day of his journey with the organization.
Post multiple challenging opportunities aiding professional development, Abhinandan was now tasked
with heading sales for the Eastern Region of India. With a team of 90 members at various grades
(Managers, Executives & Officers) in the Eastern Region, he was managing one of the largest businesses
which contributed close to 28% of the companys turnover.
Reflecting on his journey within Marico, Abhinandan put the newspaper aside, when his secretary came
in with news of some people keen on having an urgent audience with him. The people, from the Retailer
Association of West Bengal and led by their General Secretary, seemed disturbed, she said.
Given Maricos cordial and long standing relations with the retailer association in Bengal, Abhinandan
immediately met with them to understand the context of the meeting. The General Secretary, Mr. Tapas
Ghosh handed over a letter, with content typed as below:
----------------------------------------------------------------------------------------------------------------------------------------Regional Sales Head,

7th August ,2014

Marico Ltd, Kolkata.

Sir,
Subject: Non Allowance of supply to Walmart and Modern Retail in East
We, the Retailer Union of West Bengal, have been intimated through recent newspaper reports and
internal news, that the MNC Supermarket Chain- Walmart, has decided to set up 7 stores in West
Bengal within the next 11 months and has already begun warehouse scouting and construction
activities for the same.
Given the subsidized land and benefits offered to the Chain from the West Bengal Government, and the
support in the current times for FDI in Retail, we expect them to fulfill on the 11 stores within the
stipulated time.

We would like to bring to your notice that we are very concerned and disturbed by this development
and would like to bring forth our concerns below:
1) These stores, to attract new customers will resort to unfair practices of heavy discounting and
promotions which cannot be matched by small shopkeepers. All Small and Marginal stores in the
vicinity of these stores will face huge business losses. Walmart will lower prices to dump goods,
get competition out of the way, become a monopoly and then raise prices. This was the same
case for the soft drinks industry, where Pepsi and Coca-Cola came in and wiped out all the
domestic brands and local competition.
2) Unskilled labor in the smaller shops will become unemployed once these shops start facing
losses
3) Families of the smaller shopkeepers and labor, which are entirely dependent on the shops for
their livelihood, will be rendered helpless, leading to issues of discontinuance of children
education, migration out of village etc.
4) Small and marginal farmers, who supply their produce to these shops will face losses as Walmart
is known to buy at certain wholesale prices at auctions and drives prices down.

These concerns are very serious ,and we have decided not to allow this to happen, for the protection of
our families and future.
You are hereby notified that you cannot supply to Walmart when they set up stores in West Bengal and
have you cannot have absolutely any business dealing with them here.
In case you choose to ignore these serious issues and go ahead with supply to Walmart, we will
completely stop dealing with you for all times to come and ensure that no retailer in West Bengal stocks
your products at any time.
You are requested to revert with your confirmation within a week.
Regards,

Tapas Ghosh
General Secretary,
Retailer Association, West Bengal.
Abhinandan read through the letter and asked his secretary to photocopy the same. In the meanwhile,
he exchanged pleasantries with the association members while steering clear of any discussion on the
contents of the letter.

A short while later, after seeing off the association members, Abhinandan started thinking of the current
facts:

Walmart, Carrefour, Tesco, Metro Cash n Carry etc, as Modern retailers have identified India as
a key growth market and are extremely bullish on growths (organic and inorganic) in the South
Asian space
Globally, these Modern retailers control a large pie of retail business in developed/semi
developed economies encompassing US, Asia, Europe, Australia, Latin America etc. India is a
unique retail space where the bulk of retail business does not come in from these global
retailers but from the smaller/mid size shopkeepers, also known as the mom-pop stores or
Kiranas.
Country

Modern Retail Contribution

India

7%

China

20%

Thailand

40%

USA

85%

In India, the contribution of these global retailers to the retail business is only 7% ,though it is
growing at a 3 yr CAGR of 38%. Maricos business in India has about 14% contribution coming in
from these modern retailers.
The Kiranas on the other hand, contribute the remaining 86% of Maricos business in India,and
split between urban, semi urban and rural geographies, they cater to the vast population and
geography of India.
In the Eastern Region for Marico, the General Trade : Modern Trade business contribution also
stands at 86%:14%
Kiranas are one of the pillars of the West Bengal Economy and account for 18 percent of the
State GDP and employ 4% of the state population.
Marico enjoys an excellent business partnership with these global retailers in India while also
being an active business partner in their international locations like Dubai,South Africa, Vietnam,
Malaysia,Egypt etc.

Margin differential offered by Marico to the 2 channels: General Trade(Kiranas) and Modern Trade
Distributor Margins
Category

General Trade(Kirana) Distributors

Modern Retail
Distributors

Value Added Hair Oils

8%

0%*

Edible Oils

6%

0%*

Laundry

9%

0%*

Processed Foods

10%

0%*

Youth Brands (Deodorants, Hair gel)

10%

0%*

*0% in Modern Retailer Margins, as Company supplies directly (without distributor) to the Modern Retailer Godowns

Retailer Margins
Category

General Trade(Kirana) Margins

Modern Retailer Margins

Value Added Hair Oils

7%

12%

Edible Oils

6%

8%

Laundry

10%

12%

Processed Foods

11%

11%

Youth Brands (Deodorants, Hair gel)

11%

11%

Category

General Trade(Kirana)

Modern Retailer

Value Added Hair Oils

4%

2%

Edible Oils

2%

4%

Laundry

2%

0%

Processed Foods

4%

2%

Spend Differential
Marico's Promotion Spends as a % of
turnover

Youth Brands (Deodorants, Hair gel)

6%
8%
*The promotion spend is given to the retailer by the company. (Not necessarily passed on to customer by the retailer)

Contributions and Growth Differential (In East Region of Marico)

General Trade(Kirana)

Modern Trade

Category

Contribution of
Category to Business

YOY Category
Growths

Contribution of
Category to Business

YOY Category
Growths

Value Added Hair Oils

24%

23%

17%

36%

Edible Oils

33%

16%

21%

26%

Laundry

8%

28%

18%

37%

Processed Foods

12%

27%

14%

44%

Youth Brands (Deodorants,

Hair gel)

23%

32%

30%

41%

Abhinandan cannot afford to take an extreme stand of preventing supply to Walmart when they set
shop in West Bengal but also needs to prevent ruffling feathers in the Retailer Association.
The Retailer Association has sent across this letter to all FMCG/FMCD & Apparel firms in West Bengal
and is looking towards support in preventing the entry of these retailers.
If you were in Abhinandans place, make a detailed plan of addressing this deadlock:

1) Manage the situation in terms of ensuring no risk to a stable business

2) Ensure there is no threat to a good relationship with the global retailers
3) Provide a comprehensive strategy that manages business continuity and accelerates growth,
while also being complementary in terms of channel and portfolio selection
4) The strategy should also cover communication to the various stakeholders, timelines,
communication plan etc.